Split-Award Tort Reform, Firm's Level of Care, and Litigation Outcomes

We investigate the effect of the split-award tort reform, where the state takes a share of the plaintiff's punitive damage award, on the firm's level of care, the likelihood of trial, and the social costs of accidents. A decrease in the plaintiff's share of the punitive damage award reduces the firm's level of care and therefore increases the probability of accidents. The effects of split awards on the likelihood of trial and social costs of accidents are ambiguous. Conditions under which a decrease in the plaintiff's share of the punitive damage award reduces the probability of trial and the social cost of accidents are derived.